This is the SFN Market Report with Brooks Schaffer of Palmetto Grain. Reach him at brooks@palmettograin.com or 843-540-4540.
Late Friday, USDA announced it had made a mistake in calculations on a crop report and was making some revisions. Unfortunately, the agency claims that the only mistakes were on the September report and not the October report that killed the market. As a result of its error, USDA raised the U.S. corn yield for Nebraska by 5 bushels and lowered Kansas by 3. This very minor change will have almost no impact on the market. It is the October report that we are questioning more than the September report. What it does is further undermine USDA’s credibility. The pressure was so great on these last two reports that the agency had to do something. But it did so close to nothing that it truthfully may have been better off doing nothing.
The other big news of the weekend was the surprise results from the Brazilian election. During round one, no presidential candidate got more than 50% of the vote, so there was a runoff election between sitting President Luiz Inácio Lula da Silva, who spent some time in jail for corruption, and Flávio Bolsonaro, whose father was also recently president but is currently in jail for leading a coup. Bolsonaro had gotten more votes during the first election and was widely expected to win the runoff. The prediction markets gave Bolsonaro a 90% chance of victory. In a surprise, Lula won, and the Brazilian currency dropped dramatically, making Brazilian agricultural exports cheaper for the rest of the world. Soybeans dropped hard on Monday, even though it will likely not make any difference. China is probably going to buy 25 million metric tons from the U.S. and not a bit more, and it probably was not going to buy any more anyway. It’s a political purchase, not a market purchase. It will not be determined by price but by political pressure.
Wheat dropped as well on Monday after Russia said it might be willing to discuss the conditions of a possible meeting. So, it is willing to talk about talking. Yet missiles keep flying from both sides. It does not seem like peace is right around the corner, but until the U.S. sees some export sales, the market is going to continue to lean bearish.
Corn harvest progress was reported at 60% complete, which is some major progress from 44% last week. That gets us a lot closer to the average for this week of 66%. Iowa is still behind average at 47% complete, compared to the average of 67%, but it made up a lot of ground since it was at 26% last week. Soybean harvest actually exceeded the five-year average at 79%, compared to 77% on average. Iowa lags the average but is very close at 78% complete, compared to 84% on average. With wide-open weather windows for the next week, we will go a long way toward getting the crop in the bin this next week. Getting harvest behind us will help the market find a floor.